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June 11, 2024

London Stock Exchange-Listed ETF Report: May 2024

by Dewi John.

Headline figures

 

Assets Under Management[1]

Chart 1: Assets Under Management of ETFs Listed on the LSE by Asset Type as of May 31, 2024 (£bn)

Source: LSEG Lipper

 

Total ETF assets rose strongly by £35.52bn (up 3.4%) over May, driven by strong net inflows (see chart 2), growing 28.5% on an annual basis. Money market funds (MMFs) saw the greatest growth in percentage terms on a month-on-month basis (5.3%). Note also that this monthly growth is from a low base, as just 1% of ETF assets are held in commodity funds. On an annualised basis, MMF ETFs also grew the most, at 47.7%, followed by equities (34.4%) and commodities (19.5%). Conversely, mixed-assets ETFs were once more the main negative movers, down to 66.5% of their assets 12 months ago, albeit from a low base—currently 0.1% of ETF assets.

Equity and bond funds comprise the overwhelming majority of the total, at 78.1% and 19.6%, respectively.

 

Flows

Flows by Asset Type

Chart 2: Estimated Net Flows in ETFs Listed on the LSE by Asset Type, May 2024 (£bn)

Source: LSEG Lipper

 

Total flows were more than double April’s £7.78bn, at £16.47bn (£90.05bn over 12 months)—also making it the best month of the year for inflows, beating January’s £12.6bn.

As the equity market rebounded from April’s retreats over May, ETFs were significant beneficiaries. Equity funds netted most of this, at £13.21bn (£90.05bn over 12 months).

As in April, all asset class flows were in the black for May, with bond ETFs taking £2.27bn—again, roughly double that of the previous month (£17.98bn over 12 months); money market £660m (£3.31bn); commodities at £295m (£950m); alternatives £31m (-£525m); and mixed assets £4m (-£523m).

 

Largest Inflows

Chart 3: Ten Best-Selling Lipper Global Classifications, May 2024 (£bn)

Source: LSEG Lipper

 

May saw equities and bonds rebounded April’s market weakness pullback. Within equities, UK mid-caps, Europe, and the US outperformed global equities, while the FTSE 100, APAC, Japan, and emerging markets lagged, although the latter still saw inflows of £876m.

Despite the US’ outperformance, Equity Global ETFs saw the strongest inflows, raking in £4.08bn. Nevertheless, it was still a strong month for US equity ETFs, which took £2.82bn. Tech stocks led May’s S&P 500 rally, and this was reflected in Equity Sector Information Tech inflows of £680m. Also, the FTSE 250’s outperformance notwithstanding, Equity UK Small- and Mid-Cap ETFs took a relatively modest £159m, while Equity UK attracted £370m.

 

Source: LSEG Lipper

 

Source: LSEG Lipper

 

Lastly, despite the current mood music being that China is currently “uninvestable”, clearly not everyone agrees (despite £139m of outflows in April), as Equity China ETFs saw robust inflows of £376m. Other equity sectors to see positive flows were Industrials (£345m) and Financials (£301m).

 

Largest Outflows

Chart 4: Ten Largest Outflows by Lipper Global Classification, May 2024 (£bn)

Source: LSEG Lipper

 

Equity Europe ex UK saw the same outflows as last month (-£333m), when it suffered the heaviest losses—this, despite the relatively strong performance of European equities. Similarly, ETF investors took £80m of Equity Japan assets off the table after a strong 12-month run up to the end of Q1 24 for the market.

This month, however, it was Bond EUR Corporates which saw the heaviest outflows (-£392m). Seven out of the bottom 10 classifications by flows were bonds, broadly based, with no particular theme (aside from something of a skew to euro-denominated fixed income) emerging with redemptions from the asset class. One thing that is evident is a shift out of Bond EUR Inflation Linked (-£35m) into USD-denominated linkers.

As was the case last month, Equity US Income continued to shed money (-£15m) despite the overall popularity of US equities. At an equity sector level, the only significant outflows were from Agribusiness ETFs (-£30m).

 

Sustainable ETFs

Chart 5: Sustainable ETF Sales (LHS, £m) and Estimated Net Flows (RHS, £bn), May 2024

Source: LSEG Lipper

 

Some £161.46bn of ETF assets on the London Stock Exchange are defined by Lipper Research as sustainable, held across 428 vehicles (see definition below), down from £157.59bn in April. The bulk (84.06%) are equity, with 15.94% in bond vehicles. Mixed-assets funds—always small—have completely dropped from the table.

Total sustainable flows largely recovered from April’s strong reversal of flows, taking £923m in May. Sustainable equity ETFs attracted £1.39bn, mirroring April’s outflows, while their fixed income peers lost £463m.

As can be seen from the table below, the top money takers were in line with conventional flows, as investors favoured Equity Global and Equity US sustainable funds.

 

Source: LSEG Lipper

 

The Sustainable section has a narrower and stricter focus than those which indicate some form of ESG strategy in their fund documentation—to a smaller group of sustainable funds, defined as all SFDR article 9 funds plus all Lipper Responsible Investment Attribute funds reduced to those containing indicative sustainable keywords in the fund name.

 

Trading Volumes

Chart 6: ETF Turnover (GBP bn) and as a % of Total London Stock Exchange Order Book Turnover

Source: LSEG Lipper

 

The average traded value for ETFs in May was £10.64bn, down from the previous month’s £12.91bn, accounting for 10.48% of total London Stock Exchange average daily turnover, a lower proportion than for the previous month. This is a little counterintuitive, given that flows are well up on April. One possible reason for this is that the flows recorded by Lipper are not exchange-specific, so it’s likely that the flows are coming from other exchanges on which LSE-listed ETFs are also listed.

This is also suggested by the fact that two of the top-10 traded ETFs are FTSE 250 trackers, with UK mid-cap products not making an appearance on chart 3.

 

Top Traded ETFs on London Stock Exchange in May 2024

Source: LSEG

 

Active ETFs

Chart 7: Active and Passive, Total Net Assets (LHS, %), and Estimated Net Flows (RHS, £bn), May 2024

Source: LSEG Lipper

 

There are 85 active and 1,697 passive ETFs listed on the LSE. Active ETFs total net assets were 1.73% of the total, or £17.54bn. Active ETFs saw inflows of £839m, up from £646m in April, with flows dominated by JP Morgan, which took £766m (see table below). No other promoter took more than £50m into actively managed ETFs. What’s also of note in the table below is that, as in March and April, all its members are ESG funds.

Meanwhile, passive ETFs attracted £15.63n—more than double the prior month.

 

Table: Five Best-selling Active ETFs, May 2024 (£m)

Source: LSEG Lipper

 

New Listings

Chart 8: New listings on the London Stock Exchange since 2004

Source: LSEG Lipper

 

There have been 92 launches year to date. Some 22 were over May. Of the 22 launches this month, three were equity, one alternatives, with the rest being fixed income. That’s ahead of the rate of launches for any year since 2018, assuming a steady rate of launches.

Most notably, the are 12 target maturity fixed income launches, the bulk from Invesco.

 

New Launches, May 2024

Source: LSEG Lipper

 

Flows by Promoter

Chart 9: 10 Best-Selling ETF Promoters  on LSE, May 2024 (£bn)

Source: LSEG Lipper

 

There are 29 promoters with ETFs on the LSE. Five—considerably more than the normal one or two—had flows of more than £1bn over May, with the largest being BlackRock (£5.32bn). BlackRock netted £3.39bn in equity flows, and £1.5bn to its bond funds, while the overwhelming bulk of second-placed DWS went to equity ETFs (£2.93bn).

Eight more accounted for flows of more than £100m, while six suffered outflows. It’s therefore been a bumper month for more than just the regular market-dominating firms.

 

[1] This report covers all assets under management and estimated net flows for ETFs listed on the London Stock Exchange. This means while turnover and trading volume are measures that are taken per exchange, flows and assets under management can only be calculated on a pan-European basis, since most ETFs in this report are cross-listed on various exchanges.

 

LSEG Lipper delivers data on more than 380,000 collective investments in 113 countries. Find out more.

The views expressed are the views of the author and not necessarily those of LSEG Lipper. This material is provided as market commentary and for educational purposes only and does not constitute investment research or advice. LSEG Lipper cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided in this publication or from any other source mentioned. Please consult with a qualified professional for financial advice.

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